Average Irish pension falls by 2.9%

A senior economics lecturer warned today that this country was facing a serious financial situation in the wake of the economic crisis in the US.

Dr Alan Ahearne, lecturer in economics at NUI Galway, said the situation was “very serious”, calling yesterday’s dramatic drop in global markets the biggest banking crisis since the Second World War.

“It’s going to get an awful lot worse before it gets better, that’s for sure.”

With the dollar plunging towards €1.60, Dr Ahearne feared this would lead to a very bad one or two year period for the Irish economy, with job losses and further hits to the housing market.

“A typical housing downturn lasts about five years,” he explained.

The latest world financial crisis was sparked yesterday when investors were panicked by the bargain sale of US investment bank Bear Stearns.

It faced bankruptcy when clients lost confidence in the firm and started to withdraw funds.

The Irish Stock Exchange recovered slightly today following yesterday’s massive losses of €3.5m which were wiped off the value of shares in the wake a latest banking crisis in America.

All of the Irish bank stocks dropped in value yesterday, with Anglo Irish Bank taking the biggest hit, losing more than 15%, or some €1bn, to close at €6.96.

At one point yesterday, Anglo was down by a massive 22%.

AIB was down by 6%, while Bank of Ireland and Irish Life and Permanent both declined by 5%.

In early trading today Dublin’s ISEQ index was up just over a modest 1% but fell back by 0.5% in later dealings.

The banks made back some of yesterday's losses. AIB was up 2.4% to €12.40, while Bank of Ireland added 2.8% to €8.85, with Anglo Irish gaining 1% to €7.28.

People with pensions now face the prospect of seeing the value of their retirement package fall as large amounts of their cash are invested in stocks.

Deborah Reidy, of pension experts, Hewitt Associates, said the average Irish pension fund lost about 2.9% yesterday.

“At this stage we are we are looking at a loss of 17% for the 12-month period.”

However, she pointed out that pensions funds were still up over 5% for the five-year period.

The US Federal Reserve, the American equivalent of the ECB, is expected to slash interest rates by as much as 1% to 2% tonight in an effort to boost the flagging economy.

Dermot O’Leary, of Goodbody Stockbrokers, predicted that eurozone rates would begin to drop in June.

Article courtesy of The Evening Echo